[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
                 PROTECTING MARITIME JOBS AND ENHANCING
                MARINE SAFETY IN THE POST-BUDGET CONTROL
                ACT FISCAL ENVIRONMENT: A REVIEW OF THE
                   ADMINISTRATION'S FISCAL YEAR 2013
                COAST GUARD AND MARITIME TRANSPORTATION
                             BUDGET REQUEST

=======================================================================

                                (112-75)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                COAST GUARD AND MARITIME TRANSPORTATION

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 7, 2012

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure


         Available online at: http://www.gpo.gov/fdsys/browse/
        committee.action?chamber=house&committee=transportation


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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                    JOHN L. MICA, Florida, Chairman
DON YOUNG, Alaska                    NICK J. RAHALL II, West Virginia
THOMAS E. PETRI, Wisconsin           PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina         JERRY F. COSTELLO, Illinois
JOHN J. DUNCAN, Jr., Tennessee       ELEANOR HOLMES NORTON, District of 
FRANK A. LoBIONDO, New Jersey            Columbia
GARY G. MILLER, California           JERROLD NADLER, New York
TIMOTHY V. JOHNSON, Illinois         CORRINE BROWN, Florida
SAM GRAVES, Missouri                 BOB FILNER, California
BILL SHUSTER, Pennsylvania           EDDIE BERNICE JOHNSON, Texas
SHELLEY MOORE CAPITO, West Virginia  ELIJAH E. CUMMINGS, Maryland
JEAN SCHMIDT, Ohio                   LEONARD L. BOSWELL, Iowa
CANDICE S. MILLER, Michigan          TIM HOLDEN, Pennsylvania
DUNCAN HUNTER, California            RICK LARSEN, Washington
ANDY HARRIS, Maryland                MICHAEL E. CAPUANO, Massachusetts
ERIC A. ``RICK'' CRAWFORD, Arkansas  TIMOTHY H. BISHOP, New York
JAIME HERRERA BEUTLER, Washington    MICHAEL H. MICHAUD, Maine
FRANK C. GUINTA, New Hampshire       RUSS CARNAHAN, Missouri
RANDY HULTGREN, Illinois             GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania           DANIEL LIPINSKI, Illinois
CHIP CRAVAACK, Minnesota             MAZIE K. HIRONO, Hawaii
BLAKE FARENTHOLD, Texas              JASON ALTMIRE, Pennsylvania
LARRY BUCSHON, Indiana               TIMOTHY J. WALZ, Minnesota
BILLY LONG, Missouri                 HEATH SHULER, North Carolina
BOB GIBBS, Ohio                      STEVE COHEN, Tennessee
PATRICK MEEHAN, Pennsylvania         LAURA RICHARDSON, California
RICHARD L. HANNA, New York           ALBIO SIRES, New Jersey
JEFFREY M. LANDRY, Louisiana         DONNA F. EDWARDS, Maryland
STEVE SOUTHERLAND II, Florida
JEFF DENHAM, California
JAMES LANKFORD, Oklahoma
REID J. RIBBLE, Wisconsin
CHARLES J. ``CHUCK'' FLEISCHMANN, 
    Tennessee
                                ------                                7

        Subcommittee on Coast Guard and Maritime Transportation

                FRANK A. LoBIONDO, New Jersey, Chairman
DON YOUNG, Alaska                    RICK LARSEN, Washington
HOWARD COBLE, North Carolina         ELIJAH E. CUMMINGS, Maryland
ANDY HARRIS, Maryland                CORRINE BROWN, Florida
FRANK C. GUINTA, New Hampshire       TIMOTHY H. BISHOP, New York
CHIP CRAVAACK, Minnesota             MAZIE K. HIRONO, Hawaii
BLAKE FARENTHOLD, Texas              MICHAEL H. MICHAUD, Maine
JEFFREY M. LANDRY, Louisiana,        NICK J. RAHALL II, West Virginia
  Vice Chair                           (Ex Officio)
JOHN L. MICA, Florida (Ex Officio)


                                CONTENTS

                                                                   Page

Summary of Subject Matter........................................    iv

                               TESTIMONY

Admiral Robert J. Papp, Jr., Commandant, United States Coast 
  Guard..........................................................     5
Master Chief Michael P. Leavitt, Master Chief Petty Officer, 
  United States Coast Guard......................................     5
Hon. Richard A. Lidinsky, Jr., Chairman, Federal Maritime 
  Commission.....................................................     5
Hon. David T. Matsuda, Maritime Administrator, U.S. Department of 
  Transportation, Maritime Administration........................     5

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Hon. Elijah E. Cummings, of Maryland.............................    38

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Admiral Robert J. Papp...........................................    47
Master Chief Michael P. Leavitt \1\..............................
Hon. Richard A. Lidinsky, Jr.....................................    72
Hon. David T. Matsuda............................................    84

                       SUBMISSIONS FOR THE RECORD

United States Coast Guard insert for the record..................    36
Admiral Robert J. Papp, Jr., Commandant, United States Coast 
  Guard, responses to questions from Hon. Frank A. LoBiondo, a 
  Representative in Congress from the State of New Jersey........    56

----------
\1\ Master Chief Michael P. Leavitt did not submit a written 
  statement.

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PROTECTING MARITIME JOBS AND ENHANCING MARINE SAFETY IN THE POST-BUDGET 
CONTROL ACT FISCAL ENVIRONMENT: A REVIEW OF THE ADMINISTRATION'S FISCAL 
    YEAR 2013 COAST GUARD AND MARITIME TRANSPORTATION BUDGET REQUEST

                              ----------                              


                        WEDNESDAY, MARCH 7, 2012

                  House of Representatives,
                    Subcommittee on Coast Guard and
                           Maritime Transportation,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:00 a.m. in 
Room 2167, Rayburn House Office Building, Hon. Frank LoBiondo 
(Chairman of the subcommittee) presiding.
    Mr. LoBiondo. Good morning. The subcommittee will come to 
order.
    Before we get into the heart of the hearing, let me remind 
everybody that last week a very tragic event took place. We had 
a Coast Guard helicopter that went down in Mobile Bay, Alabama, 
on a training mission. Three servicemembers tragically lost 
their lives, and one is still missing. This is a very stark 
reminder of what our men and women in the Coast Guard have 
signed up to do, and how they put themselves in harm's way 
every day. Our Nation owes them a great debt of gratitude. And 
we should be keeping the families in our thoughts and prayers, 
and wishing them peace and strength.
    So, Admiral Papp, if you would, please extend our 
condolences.
    The subcommittee is meeting today to hear testimony on the 
President's fiscal year 2013 budget request from the leaders of 
the three Federal agencies which promote, protect, and regulate 
vessels and mariners in U.S. waters and in international trade.
    As my colleagues know, our Nation is facing a very tough 
budget climate, as we try to control our exploding national 
debt. This Congress must continue to make extremely difficult 
decisions to bring our spending under control and to cut the 
deficit. The effort continues today with the presentation of 
the fiscal year 2013 budget request.
    The President requests $9.96 billion for the Coast Guard in 
fiscal year 2013, a 4-percent cut over the current level. This 
is the first time in over a decade that a President proposes to 
reduce funding for the Coast Guard. These cuts have me gravely 
concerned. We will repeat the same mistakes we made in the 
1990s, when misguided cuts to the Service's operating and 
acquisition budgets left it entirely unprepared to meet the 9/
11 mission which was thrust upon the Coast Guard.
    For the fiscal year 2013 operating budget, the President 
proposes to slash the number of Coast Guard servicemembers by 
more than 1,000. Now, 1,000 may not seem like much, but for the 
Coast Guard that is a huge number, when we fought for so long 
to get that number up.
    Those thousand will shutter recruiting stations, close 
seasonal air facilities, take recently upgraded helicopters out 
of service, and exacerbate the growing patrol boat mission hour 
gap by retiring vessels before their replacements arrive.
    For acquisition, the President proposes to slash the budget 
by $272 million, or 19 percent below the fiscal year 2012-
enacted level. The request proposes to terminate or delay the 
acquisition of the critically needed replacement assets, 
including Response Boats-Medium, Fast Response Cutters, 
Maritime Patrol Aircraft, Long Range Surveillance Aircraft, and 
Unmanned Aircraft Systems. It also proposes to put off 
important upgrades to the Jayhawk helicopter fleet, and delay 
sustainment projects on buoy tenders.
    Finally, the request slashes the budget for improvements to 
shoreside installations by over 86 percent--86 percent, that is 
a big number--and eliminates funding to renovate its derelict 
housing for servicemembers and their dependents. And for me, 
that is one of the most troubling aspects, where we ask men and 
women to serve their country and put their lives on the line, 
and in many cases they are in substandard housing, as it is. 
Derelict is the proper word. And we eliminate funding to do any 
renovation, that is just not right.
    Although I commend Admiral Papp for being honest about what 
these cuts will mean for the ability of the Coast Guard to 
successfully conduct its missions, I am very disappointed that 
the Secretary of Homeland Security and the President feel, 
nonetheless, it is acceptable to make them. Admiral Papp, you 
have been put in a very tough situation, and we understand 
that.
    As I have said before, I think there are ways to find 
savings in the Coast Guard's budget by trimming administrative 
costs and implementing efficiencies and operation. Our Coast 
Guard authorization bill, which passed the House in November--
overwhelmingly, I might add--provided for just that. But this 
budget request undermines the Service readiness and mission 
effectiveness, and could adversely impact the safety and 
security of our ports and waterways.
    The budget request for the Maritime Administration 
represents a 1.6-percent reduction below the current level. 
Most of the cuts come from zeroing out funding for grants or 
other programs which are meant to revitalize the maritime 
sector and protect U.S. mariner jobs.
    I am particularly concerned with the Administration's 
proposal to yet again zero out funding for title 11 loan 
guarantees. Title 11 program has served as an important 
catalyst for growing American shipbuilding jobs in the past, 
and it could be an important component to further our recovery 
from the current recession with very little cost to the 
taxpayer.
    Finally, the budget request for the Federal Maritime 
Commission proposes a nearly 8-percent increase over current 
levels. Although an 8-percent increase in the FMC budget 
amounts to less than $2 million, I think it sends the wrong 
signal in the current fiscal environment. The Commission needs 
to take a much closer look at their operations, and to try to 
develop savings through consolidation of services and more 
efficient operations.
    With that, I would like to yield to Mr. Larsen for any 
comments he may wish to make.
    Mr. Larsen. Thank you, Mr. Chairman. And I apologize, I am 
dealing with a cold. So I will get through my comments here and 
try to wrap up. But I want to thank you for conducting today's 
subcommittee hearing to discuss the proposed budgets for the 
Coast Guard, the Maritime Administration and Federal Maritime 
Commission.
    Before I get started, Mr. Chairman, I do want to echo your 
comments made with regards to the loss of life and those still 
missing from the Coast Guard family. We all--still remain very 
concerned, and I just want to share my thoughts and prayers as 
well, Admiral and Chief.
    Maritime transportation continues to be a critical 
component of our national economy, contributing over $100 
billion annually in economic output, and generating nearly 
500,000 jobs, including 75,000 jobs aboard vessels or at 
shipyards. Investing wisely and strategically to facilitate, 
protect, and to regulate maritime commerce in the United States 
remains vital in our efforts to sustain the ongoing recovery of 
our economy.
    I remain concerned with how the Federal Government spends 
the taxpayers' money. The responsibility rests squarely on the 
shoulders of Congress. It is our obligation to ensure that the 
taxpayers get the biggest bang for the buck from the funds that 
we invest on their behalf, to sustain important Federal 
programs, including those activities that sustain the U.S. 
maritime economy.
    I noted at last year's budget oversight hearing that in our 
efforts to grapple with the Federal budget deficit, some in 
Congress are placing too much emphasis on how much can we cut. 
Rather, we should be asking a more appropriate question, which 
is: how can we best direct available Federal resources to 
generate economic growth and spur job creation?
    That point remains just as relevant today. And after 
reviewing this year's proposed budgets for the Coast Guard and 
Maritime Administration, my warning that cuts in the Federal 
spending will not result in agencies doing more with less, but 
in agencies doing less with less, seems to have been affirmed.
    Any way you slice it, the only conclusion I can reach 
concerning the Coast Guard's piece of the Federal budget pie is 
that it is insufficient to meet the demands placed on this 
multimission military Service.
    Operating expenses account would see a small increase to 
maintain the pace of field operations. I am also pleased that 
funds are requested to allow the Coast Guard to move ahead with 
the acquisition of the sixth National Security Cutter, and that 
the Administration has finally seen the light of reason, and 
requested funds to begin the planning and design work for a new 
Polar-class icebreaker. But these positive aspects are offset 
by cuts. Some steep in other Coast Guard accounts, including 
the acquisition, construction, and improvements account, and 
the research, development, test, and evaluation account.
    In particular, I am disappointed that this budget does not 
request any funds to address the long-term backlog of 
servicemember housing needs.
    I am not convinced that the budget request for the Coast 
Guard before us today is adequate to meet the demands that we 
have placed on the Service. I will be interested in hearing 
from Commandant Papp on how he expects the Service to do more 
with less, and what will be the effects of tradeoffs embedded 
in this request.
    Unfortunately, MARAD's budget proposal for fiscal year 2013 
also disappoints. Although the overall proposed budget for 
MARAD would be less than a 2-percent cut from fiscal year 2012, 
important MARAD accounts that support our domestic ship 
building industry would go without.
    First, as the chairman noted, the title 11 loan guarantee 
program which contributes to the ability of the United States 
to carry its foreign and domestic waterborne commerce helps 
sustain efficient shipbuilding activities, and preserves a 
skilled shipbuilding workforce would go unfunded in this 
budget.
    Second, the budget would eliminate funding for the 
assistance to small shipyards program. Similar to title 11, 
this program has made an important set of targeted investments 
to improve American port infrastructure, create American jobs, 
and help domestic shipyards. Rather than eliminating these 
programs, we should be investing in them to stimulate job 
growth, allow U.S. firms to retool to remain globally 
competitive, and provide a genuine return on investment for the 
taxpayers here in the U.S.
    If there is a ray of optimism this morning, it might be the 
proposed budget for the Federal Maritime Commission. For the 
second consecutive year, the Administration has proposed a 
modest increase to support the Commission. In light of the 
turbulent global economy, and the need to maintain reliable, 
efficient, and affordable marine supply chains, the Commission 
continues to play an often overlooked but vital role in 
monitoring world shipping practices.
    I do want to hear from Chairman Lidinsky in how the 
Commission intends to use the new funding proposed in this 
budget, and what they intend to do to support greater U.S. 
exports, especially in the transpacific trade.
    With that, Mr. Chairman, I look forward to testimony from 
our witnesses. Thank you.
    Mr. LoBiondo. Thank you, Mr. Larsen. Before we go to our 
panel, I understand we have a number of State maritime academy 
cadets that are with us today. We welcome you. We applaud your 
career decisions, and hope you stick with your career dreams 
for the maritime industry. Thank you for joining us.
    Yes, Mr. Larsen?
    Mr. Larsen. I would like to welcome them. And, although he 
could not be here because he is at a Veterans' Affairs 
Committee meeting, where he is a ranking member, Mike Michaud 
from Maine wanted me--I don't know which one is from Maine, but 
Mike Michaud from Maine wanted me to specifically call out the 
guy from Maine or gal from Maine and welcome you here today.
    Mr. LoBiondo. All right. We have our witnesses today--
include Admiral Papp, the Commandant of the Coast Guard; Master 
Chief Michael Leavitt, the Master Chief, Petty Officer of the 
Coast Guard; Richard Lidinsky, the Chairman of the Federal 
Maritime Commission, and the Honorable David Matsuda, who is 
the Administrator of the Maritime Commission.
    We welcome you, Admiral Papp. The floor is yours.

 TESTIMONY OF ADMIRAL ROBERT J. PAPP, JR., COMMANDANT, UNITED 
  STATES COAST GUARD; MASTER CHIEF MICHAEL P. LEAVITT, MASTER 
 CHIEF PETTY OFFICER, UNITED STATES COAST GUARD; THE HONORABLE 
     RICHARD A. LIDINSKY, JR., CHAIRMAN, FEDERAL MARITIME 
   COMMISSION; AND THE HONORABLE DAVID T. MATSUDA, MARITIME 
  ADMINISTRATOR, U.S. DEPARTMENT OF TRANSPORTATION, MARITIME 
                         ADMINISTRATION

    Admiral Papp. Well, thank you, Mr. Chairman and Mr. Larsen, 
particularly for those kind words. If I can divert from my 
statement for just a moment, we really do appreciate your 
thoughts and your prayers for the crew of the 6535. There are 
certain things that only the Commandant of the Coast Guard can 
do or should do.
    One of those things was to fly over to Mobile on Friday to 
meet with the parents of Lieutenant Commander Taylor and the 
parents of Lieutenant Cameron, hug their mothers, do what I 
could, say what I could to help them feel a little bit better. 
But I was actually strengthened myself by the fact that they 
talked about their sons' love for the Coast Guard, love for 
flying, love for serving their country, and they died--what 
they were doing. I also had a chance to speak to the shipmates 
of Chief Petty Officer Jorge and Petty Officer Knight, who 
remains missing.
    As well, I will go down there tomorrow for the memorial 
service, to speak to all hands in the assembled community as 
the keynote speaker for that memorial service. Once again, one 
of those things that the Commandant should and must do.
    But one of the other things that the Commandant must do is 
be the voice for the men and women for the Coast Guard when we 
have these hearings to talk about our needs, our challenges 
that we are facing. And doing the former only strengthens me to 
give my best in doing this today. So thank you for recognizing 
them. And there are some challenges ahead, but the Coast Guard 
has adapted to storms in the past, and we have adapted to 
operate in times of peace, and we have continually responded to 
meet emerging maritime challenges.
    And, as I said, today is no different. Coast Guard men and 
women are confronting a diverse array of maritime threats, 
whether it is transnational smuggling or illegal fishing on the 
high seas, increasing human activity driven by the economic 
opportunity of an ice-diminished Arctic Ocean, or piracy.
    Just this past weekend, the Coast Guard Cutter Northland 
was on patrol off South America when its embarked helicopter 
spotted a go-fast vessel with numerous bails on deck. The 
vessel refused to stop, so the helicopter fired warning shots, 
and then eventually disabling fire to stop it. Northland's 
boarding team recovered 1,600 kilos, or nearly 2 tons, of pure 
cocaine, worth an estimated street value of $42 million.
    This year also celebrates a 100th anniversary of the loss 
of Titanic, yet 100 years later the cost of Concordia's recent 
loss reminds us of the importance of having safety-at-sea 
standards. And to ensure compliance, we need a robust marine 
inspection and safety program.
    As you can see, our Nation is facing many maritime 
challenges. And if we don't have the tools to confront those 
threats, they will pose a significant threat to Americans' 
prosperity, because 95 percent of our commerce travels by sea. 
This is why responsibly rebuilding the Coast Guard and 
providing our hard-working Coast Guardsmen with the tools they 
need to do their job remains my top budget priority.
    The good news is that since 9/11, because of your support, 
we have taken numerous steps to mitigate the risk overseas and 
back here in our ports, our inland waterways, and near our 
coasts. We have invested in international port security 
officers, marine safety enhancement program, and more small 
boats, more capable aircraft, and more personnel to operate 
them. We have also deployed rescue 21 distress communication 
systems throughout the continental United States and the Great 
Lakes. We have unified our field operations through the 
creation of sector commands, which brings together our 
prevention and response capabilities.
    Using the authorities you provided in the Maritime 
Transportation and Security Act, we have enhanced our regulator 
inspection and compliance programs, and we have built out a 
highly effective deployable specialized force capability within 
our ports. We have also strengthened our partnership with the 
many Federal, State, and local operation agencies that we work 
with.
    And while there is always more work to do, I can say 
definitively that in my almost four decades of service, I am 
proud to say that our shore, boat, and patrol forces are the 
best shape I have ever seen. But we never want to let the 
threats reach our ports. That is playing pure defense, it is 
sitting on our heels. We need to play offensively too, and we 
need to intercept the threats before they reach our shores.
    So, back to the Cutter Northland. The condition of our 
offshore forces, especially our major cutter fleet, is a much 
different story than our inshore forces. Despite the best 
efforts of our crews, the state of our major cutter fleet, much 
of which is in excess of 40 years of age, is deeply concerning. 
Our legacy High Endurance Cutters are only achieving 70 percent 
of their programmed underway hours, and more than 50 percent of 
the time they sail with debilitating casualties.
    This is cause for concern, because the key to interdicting 
threats offshore is maintaining a persistent presence with 
major cutters. If we don't have those cutters, and if they are 
not capable of operating independently in the transit zone and 
along the trade routes, we can not mount a response. It is just 
that simple.
    So, over the last year, almost 700 metric tons of cocaine 
moved through the western hemisphere transit zone. And despite 
of having actionable intelligence on a weekly basis, we know 
that we miss targets almost on a weekly basis because we don't 
have the major cutters out there.
    Our maritime threats are also on the rise. Expanding global 
population is placing pressure on our fish stocks and 
increasing the demand for fossil fuel. As a maritime nation and 
an Arctic nation, we require major cutters to patrol and ensure 
the stewardship of these and other deep sea routes. That is why 
we must continue to build our major cutters, such as the sixth 
National Security Cutter and the icebreaker, which has now 
kicked off in this budget. And I am extremely proud of the 
Administration for their support in this regard. But doing so 
also lowers our cost, maintaining momentum on building these 
shops, and we put National Security Cutters number four and 
five on contract for nearly the same price because we did it 
within the same year.
    And there is two other reasons for our recent acquisition 
successes: first of all, your support; and our highly capable 
acquisitions workforce. I am proud of them all. And beyond 
those major cutters, we have also delivered our first fast-
response patrol boats, and we have 11 more on order. We have 
delivered 13 Maritime Patrol Aircraft. The last two arrived 
ahead of schedule. And we have also delivered 83 of our 
Response Boats-Medium.
    So, the ships and aircraft that we are building today are 
going to define the Coast Guard's capability for the next 50 
years, the capability we need to remain true to our motto, 
semper paratus, as we enter our third century of service to the 
Nation.
    So, thanks for the opportunity to testify, and I look 
forward to expanding upon this in response to your questions.
    Mr. LoBiondo. Thank you, Admiral Papp.
    Master Chief?
    Master Chief Leavitt. Good morning, Mr. Chairman LoBiondo, 
Ranking Member Larsen, distinguished members of the 
subcommittee. It is a privilege to appear before you today, and 
it is also an honor to represent the hardworking Coast Guard 
men and women serving our Nation here in the United States and 
around the world. I continue to be humbled and amazed by the 
sacrifice, dedication, and commitment I see every day with our 
Coast Guardsmen, and for the unwavering support they receive 
from their families and loved ones, which allows us to better 
serve our Nation to its fullest extent.
    Our dedicated Coast Guard men and women are working hard 
every day to protect our Nation's interest. We are overseas, we 
are on the high seas, we are in our Nation's waters, we are in 
our Nation's ports and waterways, we are manning our operation 
stations, we are working with our local agents in industry so 
we can help keep our Nation secure.
    Right now, these brave Coast Guardsmen our out in the 
maritime environment saving lives, protecting property, 
conducting law enforcement, setting and working buoys, and by 
the way, breaking ice and so much more. I couldn't be more 
proud of the men and women of the United States Coast Guard for 
the outstanding job they do every day.
    For example, just recently the icebreaker, Coast Guard 
Cutter Healy, completed a grueling 254-day deployment where she 
and her crew successfully supported important scientific 
research in the Arctic. But as you know, the Healy was diverted 
very late in her deployment to escort the Russian flag tanker 
vessel Renda along an 800-mile journey to deliver fuel to the 
people in Nome, Alaska. As the Nation watched, the Coast Guard 
Cutter Healy fought through severe storms in freezing 
temperatures to successfully escort the tanker Renda through 
the ice for the first ever wintertime fuel delivery at sea.
    So, I want to personally thank you, Mr. Chairman and the 
members of the subcommittee, for replacing our aging assets 
with new cutters, aircraft, and boats. In my role, it is my 
responsibility to look out for our workforce and their 
families' well-being. The assets requested in our budget will 
provide our people with highly capable, safer, more efficient 
and effective platforms. Not only do these assets meet our most 
urgent operational requirements, they also help to greatly 
improve the quality of life and safety of the men and women 
that serve aboard and operate them.
    So, as you heard before, the material condition of our 
cutter fleet is unacceptable. These ships were built over 40 
years ago. The berthing areas are cramped, with up to 20 people 
sharing a common area, along with the sanitary facilities. In 
fact, Mr. Chairman, I served on board the Coast Guard Cutter 
Boutwell, a High Endurance Cutter, almost 30 years ago. And she 
was not a new ship then.
    So, our crew spends countless hours repairing old, outdated 
mechanical systems to keep the ships running. And this results 
in lost training opportunities, and a decrease in operational 
proficiency that negatively impacts the crew's morale. We owe 
them better.
    As the Commandant stated, we are now delivering and 
operating National Security Cutters to replace the aging High 
Endurance Cutter. I can tell you that the crews on these new 
ships are very excited to operate these new, very highly 
capable cutters.
    Last year in my testimony I mentioned some of the 
challenges our men and women and their families face, 
particularly with regards to housing and child care. And on 
behalf of the servicemembers, I am truly grateful for the 
housing and child care enhancements made possible in the fiscal 
year 2012 budget. Because of your support, we are making great 
strides towards enhancing these programs and bridging the 
parity gap with the Department of Defense.
    I visited multiple Coast Guard units during the past year, 
and I have heard the concerns of our members and their 
families. Ensuring adequate housing for our Coast Guard members 
living in high-cost areas is a high priority. Fiscal 
stewardship is also a high priority. And as such, we are 
currently in the process of assessing our housing inventory 
across the Nation, including Alaska, Hawaii, and Puerto Rico. 
In this constrained fiscal environment, we need to be very 
smart in how we spend our maintenance and recapitalization 
funding to sustain frontline operations so we can best support 
our members and their families.
    So, on behalf of the men and women of the United States 
Coast Guard, I thank you for your continued support of our 
military members, their families, and loved ones. Thank you for 
giving me the opportunity to recognize the great work our Coast 
Guardsmen perform every day, as well as sacrifices they endure. 
Thank you for allowing me to testify here before you today. And 
I look forward to answering any questions you may have.
    Mr. LoBiondo. Thank you, Master Chief.
    Mr. Lidinsky.
    Mr. Lidinsky. Good morning, Mr. Chairman, Mr. Larsen, and 
members of the subcommittee.
    Mr. LoBiondo. Excuse me, could you pull the microphone a 
little bit closer, maybe pull it a little bit closer to you?
    Mr. Lidinsky. Better?
    Mr. LoBiondo. That's better.
    Mr. Lidinsky. Thank you for this opportunity to present the 
President's fiscal year 2013 budget for the Federal Maritime 
Commission. With me today are FMC Commissioners Rebecca Dye and 
Michael Khouri, and I bring best regards from your former 
colleague, Commissioner Joe Brennan, who is back at the 
Commission, manning the ship. Commissioner Mario Cordero is in 
Long Beach, California, this morning, attending an important 
shipping conference. I have submitted written testimony for the 
record, and with your permission would like to give a brief 
summary this morning.
    The President's budget for the Commission provides $26 
million for fiscal year 2013. As you noted before, Mr. 
Chairman, this would be an increase of $1.9 million over the 
enacted fiscal year 2012 appropriation. This is, however, 
$265,000 less than the President's fiscal year 2012 request, 
and funds 131.6 positions at the Commission. This request would 
allow the Commission to make badly needed investments in 
information technology, increased data security, improve 
efficiency, and streamline filings and applications for the 
industry. The scope and speed of these investments and benefits 
will depend on the availability of these funds.
    The FMC greatly appreciates the faith and support that the 
chairman and rest of the committee have shown us in the past, 
and we would continue to use our limited resources wisely in 
the coming year.
    The state of the U.S. trades. My written remarks detail 
each trade route that our country deals in, but here are two 
highlights. After rapid recovery and 11-percent growth in 2010, 
total U.S. container volumes continue to grow in 2011, but at a 
more modest pace, at 4 percent. There were approximately 29.5 
million containers moving in our import trade. U.S. 
containerized exports grew by 6 percent, roughly 12 million 
containers. And I want to note that next week, the South Korea 
Free Trade Agreement takes effect. Two-thirds of our 
agricultural exports to Korea will become duty free from day 1, 
as will nearly 80 percent of our consumer industrial products. 
So this is a very bright horizon for this export trade.
    I would like to give some highlights now of the 
Commission's priorities and activities. In the coming year 
their top priority will be assisting the economic recovery for 
job growth. We will do this two ways. First, working to ensure 
our Maritime transportation system efficiently supports growing 
exports, and two, providing regulatory relief so that companies 
can hire American workers. Third, applying the lessons that we 
learned in the depths of 209 and the disruptions we saw when 
demand returned to our industry in 2010.
    Each of the commissioners is committed to working in an 
efficient, cooperative, and bipartisan manner to accomplish the 
Commission's goals. Here are the highlights of the steps that 
we are taking.
    Number one, supporting exports and economic growth. We have 
continued vigilance over the waterborne trade, as it affects 
imports and exports. Ninety-four percent of the United States 
oceans container trade travels on ships controlled by foreign 
carriers. Perhaps more often than they like, I remind these 
foreign ocean carriers that what they call a mere backhaul in 
moving their containers back out of this country, are exports 
that are crucial to our Nation's recovery.
    Last year I reported the disruptions in 2010 prompted the 
Commission to launch a fact-finding investigation led by 
Commissioner Rebecca Dye. Following her recommendations, the 
Commission formed rapid response teams that dealt with over 438 
cargo-related complaints that led to cases in dispute 
resolution. We increased oversight of discussion agreements in 
our largest Pacific trade with the two talking agreements 
there.
    Throughout the past year we have continued these efforts. 
And although current shipping capacity is adequate, we will 
continue to apply lessons learned, and watch closely for new 
signs of disruptions that we saw last year, 2 years ago.
    We are looking at new ways to assist exporters. After 
hearing from several major agricultural exporters, our staff is 
now looking at the idea of using data on file, while protecting 
service contract confidentiality to develop a container 
shipping rate index for targeted exports, such as grain, 
cotton, hay, and frozen meat. This will give exporters useful 
information to plan and hedge transportation costs that will, 
in turn, increase export sales. We look forward to the views of 
the industry on this matter, and the committee, as we consider 
this idea.
    One related note. Last week we issued a final rule 
clarifying that shippers and carriers can use service contracts 
with rates that adjust based on container freight indices. For 
small businesses and individuals we are developing a search 
tool on our Web site to help locate nearby licensed and bonded 
NVOCCs.
    Mr. Cummings is present, and I would just note that the 
item that he brought up 2 years ago has finally bore fruit with 
the USDA having a new project taking effect next month that 
will allow potential exporters to access a computer to see if 
container availability is present in about a dozen Midwest 
cities. So that is another tool in our arsenal to help exports.
    In addition to supporting exports, we have tried to reduce 
regulatory burdens. In February of last year, we issued a final 
rule to relieve 3,500 licensed NVOCCs from having to publish 
their tariff rates. The Commission has also been working on our 
rules and procedures to make them more clear and efficient.
    Just last month, the Commission has finished a landmark 
study on the EU lifting of the block exemption and competition 
law. The primary issue addressed in that multiyear study was 
simple. What negative impact, if any, would repeal of the liner 
conference block exemption have on U.S. trades? The primary 
finding was that the repeal of the block exemption does not 
appear to have resulted in any impact on our trades. The study 
contains a wealth of data which maritime experts across the 
world are still analyzing. But the speculation and discussion 
concerning the study indicates the FMC's key role as experts in 
this field.
    As I said in the past on the matter of anti-trust immunity, 
it is up to the Congress to make this decision. The best the 
FMC can do is assist you with objective facts. And we will be 
happy to answer any questions--any details regarding this 
study.
    In November of last year, the Commission responded to 
requests from several Members of the House and the Senate, by 
launching an inquiry into whether Harbor Maintenance Tax and 
other factors may be causing U.S.-bound containerized cargo to 
be diverted from ports in the U.S. to Canada and Mexico. We 
received nearly 80 submissions during our comment period, and 
the Commission is working to gather additional data. We hope to 
publish this report in late spring or early summer of this 
year. In the meantime, the Commission will continue to work 
with fellow Government agencies and major trading partners to 
ensure that no unreasonable conditions impair our commerce.
    The Commission is also working to protect consumers through 
the fact-finding study of Commissioner Michael Khouri. More 
than 2,500 complaints were received in recent years concerning 
the shipment of personal household goods. Commissioner Khouri's 
findings are being adopted. And just last Friday we signed a 
memorandum of understanding with the Federal Motor Carrier 
Safety Administration to leverage the resources of these two 
agencies to protect household good movers across the country 
from the different kind of fraud that can emerge in these 
shipments.
    Mr. Chairman, thank you very much for your support of the 
Commission in the past.
    I am honored to appear before you, and be happy to answer 
any questions that you might have.
    Mr. LoBiondo. Thank you.
    Mr. Matsuda.
    Mr. Matsuda. Good morning, Chairman LoBiondo, Ranking 
Member Larsen, and members of the subcommittee. Thank you for 
the opportunity to discuss the President's fiscal year 2013 
budget priorities and initiatives for the Maritime 
Administration. With your permission, I would like to submit my 
written testimony for the record and summarize it for the 
subcommittee today.
    The Maritime Administration's statutory mission is to 
promote and strengthen the U.S. marine transportation system, 
including infrastructure, industry, and labor, to meet the 
economic and security needs of the Nation. Never has this been 
more important than today.
    President Obama understands that investment in 
transportation is critical to the success of our Nation's 
economy. And the President's budget request reflects the 
Administration's priorities. This budget request will enable us 
to build America's infrastructure for the future, while putting 
people back to work today.
    To start, the maritime industry's future will depend on 
people willing to enter this workforce of 260,000, and make 
their careers in the profession by availing themselves of 
educational opportunities. Today, I am joined by several of 
these future leaders from maritime academies across the 
country, and I thank you for welcoming cadets and midshipmen 
from California Maritime Academy, Great Lakes Maritime Academy, 
Maine Maritime Academy, Massachusetts Maritime Academy, and the 
U.S. Merchant Marine Academy in Kings Point, New York.
    The President's budget request includes funding for 
programs to support all of these institutions they attend, and 
it continues to focus on addressing long-deferred capital needs 
at the U.S. Merchant Marine Academy, as well as current 
operating requirements, so that we can continue to provide the 
highest possible caliber of academic study with state-of-the-
art learning facilities for future merchant marine officers and 
marine transportation professionals.
    Following last year's historic levels of capital funding 
for the academy, this $77 million request will allow us to 
continue our progress on improving campus facilities and 
address current academic needs.
    The budget request also includes $16 million for the State 
maritime academy programs, to continue Federal operational 
support, and allow us to provide school training ships for 
cadets to obtain valuable at-sea experience.
    For the maritime industry, putting people back to work 
today means fully funding key initiatives, like the maritime 
security program. This program, combined with the agency's 
cargo preference program, supports 60 militarily useful ships 
trading in foreign commerce. The 2013 budget request proposes 
funding this program at the full authorized level of $186 
million, including $2 million in carryover funds.
    The budget also supports our priority to develop America's 
ports and marine highways, as we focus on increasing the use of 
marine transportation within the U.S. to alleviate congestion 
on our surface networks. I am pleased to report that key 
demonstration projects in 2010 are beginning to come to 
fruition, creating new jobs on the water, as well as in our 
ports and at key freight bottlenecks.
    The President's budget includes $500 million for the 
popular TIGER grant program, which, through 3 rounds, has 
successfully funded 17 ports and maritime-related projects, 
totaling $276 million.
    Our focus on the environment remains strong, as well. As 
the Federal Government's disposal agent for large, obsolete 
commercial vessels, we propose $10 million, nearly double 2012-
enacted levels, to continue our progress in cleaning up our 
fleet sites responsibly, and create jobs in the recycling 
industry. And we propose $3 million to continue progress in 
identifying innovative operational solutions for the maritime 
industry.
    Working with our partners in the Coast Guard and the EPA, 
we are tackling new technology challenges, such as the 
management of ballast water discharges and vessel air 
emissions. And we are exploring the feasibility of a new 
generation of biofuels for use in marine engines, and using 
liquified natural gas for vessels serving the Great Lakes and 
other marine highways.
    Finally, the budget request supports our agency's greatest 
asset, its people. The Maritime Administration's expertise, 
along with industry and international relationships developed 
over time has proven invaluable to the operations of the 
Federal Government, and in meeting our mission.
    Mr. Chairman, I look forward to working with you and--on 
advancing maritime transportation in the United States. I am 
happy to respond to any questions you and the members of the 
subcommittee may have. Thank you.
    Mr. LoBiondo. OK. Thank you, Mr. Matsuda. Admiral Papp, I 
would like to start with you. The budget request calls for $13 
million to complete the mission effectiveness program on the 
fleet of 270 and 210 Medium Endurance Cutters. The capital 
investment plan contains no funding for further sustainment of 
the Medium Endurance Cutters beyond fiscal year 2013.
    Does the Coast Guard believe these vessels will need no 
further maintenance between now and the mid-2030s, when the OPC 
acquisition is estimated to be completed?
    Admiral Papp. No, sir, not right now. We have invested in 
the 210-foot Medium Endurance Cutter and the 270-foot Medium 
Endurance Cutter. And if we stay with our program of record, 
and if we can keep the Offshore Patrol Cutter on record, what 
ultimately we will do is start decommissioning our oldest 210s 
first. They are all in excess of 40 years of age right now. 
They will be decommissioned first. The average age of our 270s 
right now is about 25 years. And if we can stay with the 
program, if we stay on course, we should have our OPCs built 
out by about 2030, at which time the oldest 270 would be about 
43 or 45 years of age.
    So, it depends on how long this gets strung out, however. I 
need to qualify that. If we don't get the funding and we can't 
build out the OPCs faster, we will clearly have to reconsider 
what we do to extend the lives on the 210s and the 270s. But 
right now I don't anticipate any major projects. Our routine 
maintenance money that we get should be sufficient to keep them 
going, now that we have replaced a lot of the problem 
engineering issues that we have that have been cropping up over 
the last few years.
    Mr. LoBiondo. Admiral Papp, on the Fast Response Cutter, 
the Coast Guard proposes to withhold up to $135 million 
provided by Congress in the fiscal year 2012 budget to 
construct six new Fast Response Cutters, and instead construct 
four Fast Response Cutters in fiscal year 2012. The Service 
proposes to combine the withheld $139 million from 2012 funding 
with an additional $139 million from fiscal year 2013 to 
construct four FRCs in 2013.
    Can you talk to us a little bit about why the Coast Guard 
has apparently decided to disregard the intent of Congress and 
abandon plans to build the six FRCs in 2012?
    Admiral Papp. Well, sir, I think almost every question that 
you ask today I could probably start off by saying that I have 
a budget. At the end of the day I have been given a budget. I 
have to live within that budget. I have to make decisions on 
priorities and what we are going to maintain.
    You noted that it is a 4-percent reduction in the overall 
budget. But when you look at our acquisition funds, it is a 20-
percent reduction this year. So all of our acquisition 
portfolio, every project that we have an approved baseline on, 
what we are forced to do is go to the minimum ordering quantity 
for each and every product, including the National Security 
Cutter and other projects.
    So, for the Fast Response Cutter, our contract requires us 
to build a minimum of four each year, or a maximum of six. We 
haven't ramped up to six yet. Right now, with the shipyard, we 
have been ordering four a year. We are grateful that we got the 
money in the 2012 budget to build out six. We don't want to do 
anything contrary to the--what the Congress--congressional 
intent is, but what we would like to do is work with the 
Congress to get permission to withhold that money, so that we 
can spread out four each year to keep the minimum level order 
going for the Fast Response Cutter.
    I could only find enough money within our 2013 
appropriation in acquisitions to pay for two Fast Response 
Cutters. So in order to live up to the contract and build the 
minimum of four a year, we looked at that option of moving the 
money from 2012 into 2013 to balance it out at four a year. 
Hopefully, in future years, we will be able to go back up to 
six.
    Mr. LoBiondo. Admiral, you know that I also had the 
opportunity to sit on the House Armed Services Committee. And 
we had a hearing--I think it was in the last week--where the 
Air Force is detailing plans on divesting 21--it appears to be 
either almost or brand new C-27Js, and that they may become 
available to other services at minimal cost. Is the Coast Guard 
looking into this option, and could you tell us a little bit 
about what you may be thinking here?
    Admiral Papp. Yes, sir. We are looking into this 
vigorously. It is an intriguing prospect. I learned about it 
weeks ago, and started conversations with the chief of staff of 
the Air Force, General Schwartz. And obviously, rather than put 
it up for foreign military sales or other things, they would 
prefer to see it go to another Service, if there is a Service 
need.
    Interestingly enough, this aircraft was actually looked at 
in the deepwater system, when we had the deepwater project. It 
was one of the candidates that Lockheed Martin put forward for 
our short--our medium-range fixed-wing aircraft, Maritime 
Patrol Aircraft. Ultimately, it was compared against the CASA 
aircraft, the HC-144, which we are purchasing now. And the life 
cycle costs were higher for the C-27.
    However, having said that, if we get free aircraft or 
minimal cost aircraft, that is a very attractive option for us. 
And there are actually some benefits we could gain, because the 
C-27 uses the same engines as our C-130Js. So we already have 
those engines, training place, logistics in place for those 
engines.
    Bottom line is we are working a business case analysis. The 
Deputy Commandant for Mission Support is working that hard 
right now, and they intend to make that presentation to me 
within the next couple weeks. And as soon as we have that 
information, we would be happy to come up and brief it.
    Mr. LoBiondo. Yes, we would appreciate it. Although there 
was pushback from the HASC on how we have brand new planes that 
we are not using and we have a need, it appears the Air Force 
is determined to go down this route. So we would appreciate 
your keeping us up to date on that.
    Mr. Larsen?
    Mr. Larsen. Thank you, Mr. Chairman. I will just continue 
with Commandant Papp, but I have questions for others as well.
    With regards to icebreakers, I note that in the budget 
there is $8 million for predesign. But until new icebreakers 
are operational, what is your view of repairing and operating 
the Polar Sea to make the U.S. self-sufficient for polar 
icebreaking? You might recall we had testimony in front of us a 
few months ago with a--the idea that for a minimal--relatively 
minimal--cost in the grand scheme of building versus repairing, 
that we could get icebreakers operational. Can you talk a 
little bit about that, that cost? And have you actually 
crunched some numbers that you can share with us?
    Admiral Papp. For the Polar Sea or Polar Star? I think you 
said Polar Sea.
    Mr. Larsen. I am sorry, yes. The Star, yes, yes.
    Admiral Papp. The Polar Star is being reactivated right 
now.
    Mr. Larsen. OK.
    Admiral Papp. That is the one that was in moth balls, so to 
speak, in caretaker status.
    Mr. Larsen. Right.
    Admiral Papp. And it is in the process right now--Congress 
gave us about $80 million to reactivate that. And we will have 
that back in service in 2013.
    The Polar Sea is--it is our intent to decommission it right 
now.
    Mr. Larsen. So--then we heard some testimony a few months 
ago that with a relatively minimal investment the Sea could be 
reactivated.
    Admiral Papp. Well, I think in this current budget 
situation, relatively minimal is a relative term. And I don't 
have room in my budget, regardless of what it is. I think a lot 
of people have underestimated how much it would cost to 
reactivate the Polar Sea. We are actually having to use parts 
of Polar Sea----
    Mr. Larsen. Right.
    Admiral Papp [continuing]. To reactivate Polar Star. So I 
think there are some people who are enthusiastic about the 
potential for getting Polar Sea back out there. But the fact of 
the matter is I don't have the money to operate it. And I think 
it is much more expensive to reactivate it than some people are 
giving, in terms of estimates. It would say it is probably in 
excess of what we are spending on Polar Star right now, would 
be to get her back out there.
    So, you know, we have gotten through the last couple of 
years with just the Healy. My bridging strategy was get Polar 
Star back out there good for another 10 years. We were lucky 
this year with Healy. And once I have an additional Polar 
icebreaker out there, I am comfortable that--now I am really 
grateful we have gained traction with the Administration in 
terms of getting money to start building a new icebreaker.
    So I think we have reasons for optimism in our icebreaker 
fleet, and we need to keep that momentum going.
    Mr. Larsen. With that in mind, what would be your estimate 
on the operational capability of a new Polar icebreaker, if in 
fact $8 million is a start?
    Admiral Papp. Well, yes, sir. That is survey and design 
work. And, frankly, what we need to do now--once again, I am 
very grateful. I have been talking about this for about 2 years 
now. In fact, the Coast Guard has been talking about it even 
longer.
    Mr. Larsen. Right.
    Admiral Papp. And we finally gained some traction. What we 
have done in the capital investment plan is put rough numbers 
that we got from a business case analysis that we prepared for 
the Congress on the feasibility of keeping Polar Sea and Polar 
Star going.
    Mr. Larsen. Right.
    Admiral Papp. So those are rough numbers right now. We will 
need to refine those, as well as reach out across the 
intergovernment, the interagency, to determine the 
requirements.
    National Science Foundation has significant requirements 
that we need to meet. Department of Defense has needs for 
icebreakers from time to time. So we need to reach out, gather 
the requirements, determine what we are going to build, and 
then refine the numbers, as we go forward.
    And, oh, by the way, I think industry and other people --
obviously, the State of Alaska benefitted from Healy this year. 
I would be interested in looking at some sort of cost sharing 
on this, rather than having the Coast Guard budget absorb it 
completely.
    Mr. Larsen. So you--at least in your mind now, you are 
thinking that--to build an additional icebreaker, starting with 
what you have in this budget, that actually constructing it 
might end up being a partnership among agencies and potentially 
at least one State?
    Admiral Papp. Well, as Commandant of the Coast Guard, I 
would certainly like to see other people share in this, because 
we have a lot of other needs within our budget. But what we 
have right now is we have estimated what we think it will cost, 
which is probably in the range of about $800 million.
    Mr. Larsen. Right.
    Admiral Papp. That is spread out in our 5-year plan right 
now. And we are very anxious to step out smartly on this, and 
get it constructed.
    Mr. Larsen. OK. I see that in the plan here. I have it here 
with me.
    On that continued point with regards to the Arctic--recent 
article discussing the budget climate and choices you may have 
to make to get an operational footprint, even a temporary or a 
part-time footprint in the Arctic, can you briefly explain how 
the expansion of operations there would affect other Coast 
Guard districts?
    Admiral Papp. They are not going to affect other districts. 
I think what we will be doing this summer is, because of the 
lack of shore infrastructure, we need to put helicopters up 
there, we need to have rescue boats. There is going to be about 
600 more people. Shell will bring about 600 people up there, 33 
ships. Obviously, the potential for search and rescue, 
environmental response, security--because we know there are 
groups that are seeking to probably disrupt the operations up 
there--so we have got the full spectrum of Coast Guard missions 
that will be employed up there. But we don't have any fixed 
infrastructure. In fact, there is not hangar space at the Nome 
airport to put any of our helicopters.
    So, what we are going to do is what we have done throughout 
our history. We will take one of our major cutters, one of the 
new National Security Cutters, which can handle and hangar two 
helicopters, it can launch three small boats, it has worldwide 
command and control and communications, and we will station it. 
It is essentially a mobile Coast Guard district that can launch 
aircraft and launch boats that will provide for all our needs 
up there this next summer.
    You know, people worry about icebreakers, but the fact of 
the matter is the human activity will be up there as the ice 
recedes.
    Mr. Larsen. Right.
    Admiral Papp. So we need conventional Coast Guard cutters 
up there during the summer months to carry out these duties.
    Mr. Larsen. Right. Yes, good. Mr. Chairman, just a few more 
questions, but--for Mr. Lidinsky, and then I will yield back, 
if you don't mind.
    Just to clarify, Mr. Lidinsky, the cargo diversion study, 
you expect to have a preliminary or final report by late spring 
or early summer?
    Mr. Lidinsky. Final.
    Mr. Larsen. Final? A final report by----
    Mr. Lidinsky. Yes.
    Mr. Larsen. In that timeframe?
    Mr. Lidinsky. Yes.
    Mr. Larsen. OK, good. And can you follow up with us a 
little bit on the Korea Free Trade Agreement? What impact do 
you expect the agreement is likely to have on our containerized 
exports?
    Mr. Lidinsky. A very favorable impact. As I mentioned, 
nearly 80 percent of containerized cargo will now receive duty-
free treatment on the receiving end in Korea. We noticed 
increased requests for boxes. The shipping lines there are very 
excited about this prospect. So I think this is one bright spot 
on our export front.
    Mr. Larsen. Do you anticipate, because of that increased 
demand for boxes, that you are going to have to do some--use 
the term loosely, not in the legal sense, but adjudicating 
among shippers and----
    Mr. Lidinsky. Well, we have continued to watch that 
situation since the shortages occurred in 2010.
    Mr. Larsen. Right.
    Mr. Lidinsky. And the industry now admits there are 
adequate boxes out there. So we keep a very close watch, and 
will take appropriate measures if we have to.
    Mr. Larsen. Right. Yes, good, all right. Thank you. I will 
have a second round, Mr. Chairman. Appreciate that. Thank you.
    Mr. LoBiondo. Thank you, Mr. Larsen. And now, in the most 
honorable tradition of the Coast Guard, our honorary Master 
Chief, Mr. Coble.
    Mr. Coble. Master Chief. I am glad he said ``honorary.'' 
That way I won't be challenging you for your job. Thank you, 
Mr. Chairman. Gentlemen, good to have you all with us today.
    Admiral, the Administration proposes to close two air 
facilities which house the HA-65, the Dolphins. During the 
months of summer in Waukegan, Wisconsin, and Muskegon, 
Michigan. What will be the fiscal savings, as a result of these 
two proposed closures?
    Admiral Papp. Well, both of those are only open--both of 
those stations are only open about 103 days a year, just during 
the summer months. And we reap about 14.6--almost $15 million 
in savings by closing them.
    Mr. Coble. Is Air Station Traverse City capable of reaching 
these areas in a timely manner for emergency rescue? And if so, 
what is the response time difference?
    Admiral Papp. OK. What we have--I need to digress a little 
bit, because I have got personal experience here. I was the 
Ninth District Commander. And while I was the Ninth District 
Commander up on the Great Lakes I advocated for this, because 
we are challenged at Air Station Traverse City.
    Many years ago we used to have larger helicopters there, 
the H3 helicopter. And then the decision was made to put the 
smaller helicopters, the H-65s, up there as we transitioned. 
The challenge is they have--the H-65 is shorter duration. It is 
a slower helicopter, and it does not have de-icing. So, in the 
extreme other 9 months of the year up there, particularly the 
winter, the H-65 does not serve as well.
    Plus, it is not just Lake Michigan that Traverse City 
serves, it is also Lake Superior, which is huge. The 
helicopters that are up there right now, if they have to 
prosecute a search and rescue case in Lake Superior, often 
times have to fly, refuel, and then prosecute the case. 
Whereas, with H-60s, H-60s double the endurance time. They are 
faster. They can get there faster, they can stay on station 
longer, and they have de-icing, which is safer for my people, 
who have to prosecute these cases throughout the entire year, 
not just the summer months.
    So, having said that, it takes about an hour-and-a-half to 
get from Traverse City in an H-60 down to the extreme limit of 
southern Lake Michigan. But I think the focus has been all on 
aviation. Most of our SAR cases are not handled just by 
aviation, they are also in concert with surface forces. And we 
have four--and if you want to stretch it around, five--search 
and rescue stations just around southern Lake Michigan, all of 
which we have capitalized with much more capable, heavy weather 
capable Response Boats over the last couple years that can 
prosecute most of the cases down there, as well.
    So, I think, in my estimation, both as a former operational 
commander up there and as Commandant, southern Lake Michigan is 
well served by Coast Guard resources. And looking at the 
helicopters in isolation, particularly the two AIRFACs, is a 
little bit misleading.
    Mr. Coble. And Admiral, again, the savings? You said $15 
million?
    Admiral Papp. For closing the air facilities?
    Mr. Coble. Yes.
    Admiral Papp. Yes, sir.
    Mr. Coble. Master Chief, as a former member of the enlisted 
workforce, I would be interested in knowing. What do you regard 
the most pressing challenge, as applicable to the enlisted 
workforce in the Coast Guard?
    Master Chief Leavitt. Thank you, Mr. Coble. It is good to 
see you, by the way.
    Mr. Coble. Good to see you, sir.
    Master Chief Leavitt. It hasn't really changed since the 
last time I testified last year. Housing and child care is one 
of the number one issues out there for our workforce. And we 
are making great strides to, like I said, to shore up that 
parity between the DOD.
    But there is other things out there that are on the minds 
of our workforce, too. And they read. They take a look at the 
reductions that the Department of Defense is looking at, with 
regards to personnel, and then kind of wondering, the Coast 
Guard, how is that going to relate to them. Last year there was 
talk in regard to pay and benefits and including retirement, 
what that is going to look like. And there was a lot of anxiety 
in regards to that.
    And then last year we went through a continuing resolution. 
And it is to a point where people didn't know if that was going 
to affect their pay or not. And there are same concerns this 
year with the type of--the way we are going forward.
    So these are the main things in our folks' mind out there, 
sir.
    Mr. Coble. I thank you, sir. Mr. Chairman, my red light is 
about to illuminate, so I yield back.
    Mr. LoBiondo. We thank you very much, Mr. Coble. Mr. 
Bishop?
    Mr. Bishop. Thank you very much, Mr. Chairman, and thank 
you for holding this hearing. I have two questions for Mr. 
Matsuda, and the first has to do with the maritime security 
program.
    First off, I think we are all pleased to see that the 
maritime security program is--full funding for it is requested 
in the President's budget. I think we all agree that this is a 
very cost-efficient way for the U.S. Government to sea lift the 
assets that it must during times of war and national emergency.
    I am, however, concerned about the level of foreign 
involvement in the maritime security program. It is my 
understanding that 49 of the 60 maritime security program 
contracts are controlled by foreign companies. And it is my 
further understanding that this is clearly at odds with 
congressional intent.
    And so, my question is, what is MARAD doing to ensure that 
U.S. companies have greater access to this program?
    Mr. Matsuda. Well, thank you, sir. The maritime security 
program, we believe, provides a tremendous value to the Federal 
Government, and certainly our partners in the military. There 
is no requirement in the law that any one of these companies 
must be a U.S.-owned versus foreign owned. All of them are 
companies incorporated in the U.S. that hire U.S. mariners.
    But they--we do make sure that any time there is a new slot 
that comes available because a vessel falls out or no longer is 
able to fulfill its commitment, that we do offer a preference 
to U.S.-owned companies----
    Mr. Bishop. If I may, my understanding is that in 2003 the 
number of contracts were expanded from 47 to 60 and that, at 
that time, Congress insisted that all of the newly issued 13 
contracts go to U.S. companies.
    And so, I guess my specific question to you: has that been 
complied with? Have all 13 contracts newly issued since 2003 
gone to U.S. companies?
    Mr. Matsuda. Let me verify that.
    [Pause.]
    Mr. Matsuda. Not all 13 are currently held. The expanded 
slots are currently held by section 2 companies. The law does 
give priority to them, but we also need to take into account 
the military usefulness of the types of vessels that are 
offered.
    Mr. Bishop. All right. I think that, Mr. Chairman, this is 
an issue that I, at least, am concerned about. And can I ask 
that this committee look at the issue of perhaps the 
authorizing legislation, and perhaps look at the issue of how a 
U.S. company is defined at some future point?
    Mr. LoBiondo. It is an excellent point. But we will double-
check, Mr. Bishop. It may be House Armed Services jurisdiction. 
If it is our jurisdiction, we will certainly look at it. If 
not, we will figure out a way to get Armed Services to look at 
it.
    Mr. Bishop. Thank you very much. My second question has to 
do with the merchant marine academy. And I will speak just for 
myself.
    Each year, one of my happiest duties as a Member of 
Congress is to get to nominate young men and women, outstanding 
young men and women, to the Merchant Marine Academy, and even 
happier duty is when I get to call them to tell them that they 
have received an appointment.
    But I am also dealing, frankly, with a steady stream of 
Merchant Marine Academy alumni who are deeply concerned about 
the way in which the academy is administered, in their view. 
And I have to confess that I don't have any independent 
knowledge. But I mean, when I have an alumnus stop me on the 
street--I am used to getting stopped on the street to talk 
about health care, let's say, but when an alumnus stops me on 
the street and wants to talk about the current state of affairs 
at the Merchant Marine Academy, it raises concerns.
    My understanding is there has been three superintendents in 
the last 4 years. My understanding is there has been a very 
controversial decision to phase out a program called the GMATS 
program. So, can you--I am running out of time, but can you 
quickly sort of bring us up to date on your sense of the state 
of affairs at the Merchant Marine Academy? Are there issues 
that need to be attended to? Is there micromanagement from 
Washington, in terms of day-to-day affairs at the academy?
    Can you quickly--I am sorry, I am running out of time, but 
if you could quickly respond, I would appreciate it.
    Mr. Matsuda. Happy to. And let me just take those briefly, 
that when we came into this Administration and took a look at 
the challenges at Kings Point, there were a number of 
challenges, including the lack of internal controls, the 
handling of finances that the Government Accountability Office 
suggested we take a very close look at and review.
    We have also attempted to make sure that we have the 
leadership in place that there is no need--we certainly have--I 
can tell you this. Nobody in Washington wants to micromanage 
anybody, or certainly when it comes to the academic and success 
of the school.
    We have attempted to address each of the recommendations 
made by the Government Accountability Office. One of them was 
to go through and look at how each of the non-appropriated fund 
entities, including this one called GMATS--it was essentially a 
separate school operating on the academy campus--about how the 
finances were managed, and how they were operating with respect 
to the academy. After a thorough, it became very clear that 
this entity wasn't necessarily serving the school, the 
midshipmen, or the community there. So it was decided to 
transition the GMATS entity. Eighty-five percent of its 
customers were outside of the academy all together. They were 
either the Federal agencies or other customers.
    So, we are in the process of making that transition. I know 
it has been rough. There have certainly been a number of folks 
who have put a lot of hard work into it over the years, but it 
just does not meet the criteria to be, you know, working on the 
campus and serving the midshipmen of the academy.
    Mr. Bishop. I thank you for that--and, Mr. Chairman, just 
very quickly--would you be willing to meet with me so that we 
could pursue some of these issues? And I make that request in 
an effort to be helpful, so----
    Mr. Matsuda. Be happy to, sir.
    Mr. Bishop. Thank you very much. And thank you for 
indulging, Mr. Chairman.
    Mr. LoBiondo. Mr. Cravaack?
    Mr. Cravaack. Thank you, Mr. LoBiondo, for having such an 
important, vital meeting that we are having here today. I like 
to see Merchant Marine Academy guys here, women here, so 
welcome aboard. Good to have you here. And, Admiral Papp, I 
would like to express my condolences to the great men and women 
of the Coast Guard family for their recent loss of helicopter 
crew. So our prayers are out with your crew.
    Admiral Papp. Thank you, sir.
    Mr. Cravaack. I am very concerned with the President's 
budget and spreading Americans' sea services too thin, and 
preventing them from being able to engage the various threats 
out there that they face on a daily basis. I am also concerned 
with the fate of the 1,701 Service personnel that will be 
losing their positions if the President's budget is enacted.
    As such, I am particularly interested today to hear about 
how we can protect our maritime fleet. Because I know that is a 
vital resource of this country, American flag vessels. And I am 
very concerned with that, and making sure that our young men 
and women have a very solid merchant fleet available to them. 
Because I consider this an essential asset of the United 
States.
    I am concerned that we need to protect American jobs at 
Great Lakes, and provide the Coast Guard the resources needed 
to fulfill its responsibilities among the emerging maritime 
threats, while at the same time we need to find areas of 
efficiencies and reduced cost. But we cannot put our Nation 
unduly at risk.
    So, my question to you, Admiral, sir, would be to--what is 
America risking right now, if we go forth with these--the 
budget in our maritime forces right now?
    Admiral Papp. I would say that this budget is probably the 
last year I have where we are able to keep up our performance 
before we start eating into frontline operations.
    I think this 1,000-plus person thing is a little bit of a 
red herring, because about 700 of those are associated with 
units that are being decommissioned, and we have already 
brought crews online for the units that are replacing--for 
instance, one example would be our Fast Response Cutters. We 
only have one, which is going to be commissioned next month, 
the Bernard C. Webber. But we have--this budget will have 10 
crews standing by, ready to man the ones that are on the 
production line right now.
    And as a Service chief in an unconstrained environment, I 
would love to keep every crew on board until we have the crew 
trained up and the ship commission to replace them. 
Unfortunately, within the constraints of the current budget, I 
can't afford that luxury. So what we are doing is a reasoned, 
balancing risk decommissioning schedule for some of the older 
units as we bring on the new ones.
    We have four crews on board right now for the National 
Security Cutters. We only have three that are out there in 
commission. So we are decommissioning some of our High 
Endurance Cutters to free up trade space within the budget so 
we can maintain those new crews. So that is about 700 of them.
    The remaining people are doing a reassessment of where we 
are at. For instance, we are closing--we are doing away with 
some recruiting billets. Well, we have got people standing in 
line waiting to come to Coast Guard. Some people say they are 
waiting 12 months before they can go to boot camp, because we 
have so many people that want to be employed. So we don't need 
the recruiting effort that we needed 10 years ago right now. We 
can afford to use--to cut some of those billets right now.
    There are other things, intelligence billets, other things 
that we built up strongly after 9/11 that, now that we have 10 
years of experience, we can adjust, we can reassess and 
redistribute a little bit to make sure we are acting 
efficiently.
    With the constraints of this budget, we have to look at 
each and every thing we do, and make sure we are doing it 
efficiently. As far as turning people loose or cutting them, we 
are not going to be doing that, as far as I can determine right 
now, because we foresaw this about a year ago. We put a hiring 
freeze into effect. I think most of this will be able to be 
taken care of through attrition. Some of those military billets 
are on the books and will be transferred to other units or some 
of the new units that are coming on, and we will adjust our 
officer promotions and our intake at our recruit training 
facility to make sure that we are providing a balance, and that 
we don't have to put people out on the street.
    Mr. Cravaack. Thank you, Admiral. And my time has just 
about expired here. I will yield back and wait for a second 
round.
    Mr. LoBiondo. Thank you very much. Admiral Papp, last year 
we--oh, I am sorry, Mr. Cummings. I apologize, Mr. Cummings.
    Mr. Cummings. No problem. First of all, good morning, 
everyone.
    Admiral Papp, in recent years the Coast Guard Academy has 
made significant strides in expanding diversity. And I know 
you--that has been a majority priority of yours, and I 
appreciate that. I want to know what steps are being taken to 
maintain these gains, and will the budget cuts impede your 
ability to continue the expanded outreach and recruitment 
initiatives that have been so critical to the success?
    Admiral Papp. Well, thank you, Mr. Cummings. And I 
appreciate the work of this subcommittee over the last couple 
of years to really push us in the right direction and make sure 
that we are reaching out to all Americans. That remains one of 
my highest priorities, to make sure our entire Service--but in 
particular, our academy, where we weren't doing a very good 
job--make sure that we are spreading the word, and making it, 
the opportunity, available to all Americans.
    As you know, our percentages of underrepresented minorities 
and women continue to increase. I am very pleased with that. 
And I have stated to my staff that there will be no cut-backs 
in our efforts to recruit, particularly to come to the academy, 
and we are going to keep that effort up.
    All things, however, have to be reassessed on a year-to-
year basis, as we go forward, to stay within the limits of this 
constrained budget. That would be one of the ones that we look 
at. But most of our recruiting efforts right now that I talked 
about earlier are confined to our enlisted side of the house, 
where we have some of the highest retention that we have ever 
had in the history of the Service right now.
    Mr. Cummings. Now, Mr. Matsuda, Administrator Matsuda, let 
me tell you I want to briefly review the situation at MARAD. Is 
the deputy administrator's position still vacant?
    Mr. Matsuda. Yes, it is.
    Mr. Cummings. I can't hear you.
    Mr. Matsuda. It is, sir.
    Mr. Cummings. Is the chief counsel's position still vacant?
    Mr. Matsuda. No, no. We have a chief counsel.
    Mr. Cummings. Can you keep your voice up? I can't hear you.
    Mr. Matsuda. Yes, we have a chief counsel, sir.
    Mr. Cummings. OK. Do you--do we have any idea when that 
deputy administrator's position might be filled?
    Mr. Matsuda. We do not. We continue to look for strong 
candidates.
    Mr. Cummings. And what does that mean?
    Mr. Matsuda. Well, you----
    Mr. Cummings. ``Continue to look''?
    Mr. Matsuda. Well----
    Mr. Cummings. You could be looking for the next 10 years.
    Mr. Matsuda. Well, it is a political appointment.
    Mr. Cummings. Right.
    Mr. Matsuda. It is something that the President needs to 
make, and we work with the White House to try and identify 
strong candidates----
    Mr. Cummings. Are you involved in that process?
    Mr. Matsuda. Yes.
    Mr. Cummings. All right. And what is the status of the 
superintendent's position at the Merchant Marine Academy?
    Mr. Matsuda. Well, thank you, sir. The superintendent's 
position is vacant. It is current being advertised for being 
filled, and we are looking for the very best candidates to come 
apply. We have already received a number of applications, and 
we look forward to a strong and a thorough process. An 
inclusive one, as well, where we work with all of the academy 
stakeholders, the midshipmen, faculty, staff of the school to 
participate, as well as outside stakeholders, to make sure that 
all views are included, as we----
    Mr. Cummings. How long as that vacancy existed?
    Mr. Matsuda. The vacancy itself has been advertised 
starting the past month.
    Mr. Cummings. No, no, no, no, no, no. You are not answering 
my question. I said how long has the----
    Mr. Matsuda. Roughly since October 2011.
    Mr. Cummings. All right. Let me go into something else. 
There is significant talk about the potential of releasing oil 
from the strategic petroleum reserve as gas prices continue to 
rise. Fiscal year 2012 appropriations legislation prohibits the 
use of appropriations to waive the Jones Act unless steps are 
first taken to ensure that oil release from the SPR is 
transported on Jones Act-qualified vessels.
    Additionally, the Secretary of Transportation must provide 
a list of U.S. flag vessels that, singly or collectively, have 
the capacity for carrying releases from the SPR.
    Is MARAD prepared to implement these requirements in the 
event a drawdown is announced?
    Mr. Matsuda. Yes, we are.
    Mr. Cummings. In October, MARAD released a report comparing 
the competitiveness of U.S. flag vessels with vessels--other 
flags. As you know, I encouraged the preparation of this 
report. The report identifies the factors that raise the cost 
of operating under the U.S. flag, many of which, frankly, have 
been well-known for some time.
    Now that the report is complete, what does MARAD intend to 
do to help improve the competitive position of the U.S. flag 
fleet and our actions--and are action plans being developed? 
And when can we expect to see specific initiatives?
    Mr. Matsuda. Well, sir, after that report was released, we 
did receive feedback from other stakeholders in the industry, 
besides those who were surveyed.
    As you know, we look to the CEOs of the carriers, the 
maritime carriers, the ones who make the decisions whether to 
flag in the U.S. flag or not, try and get a sense of what their 
concerns were and what their views were of the impediments to 
flagging in the U.S. We have reached out to other stakeholders 
in the industry to get their feedback on the report, and are 
still waiting to hear from several of those.
    Mr. Cummings. All right. Thank you very much.
    Mr. LoBiondo. Thank you, Mr. Cummings. The gentleman from 
coastal Louisiana, Mr. Landry.
    Mr. Landry. Thank you, Mr. Chairman. Mr. Cummings took my 
lead-in, but I am going to be a little more direct, then.
    Are you saying that if the SPR is open again, that you 
promising this committee that we are not going to witness 
another round of record Jones Act waivers?
    Mr. Matsuda. Sir, I am committed that we will be in 
compliance with the law.
    Mr. Landry. Well, I mean, are you saying that once again 
this Administration is going to favor giving jobs to foreign 
workers over American workers?
    Mr. Matsuda. Sir, I can tell you that last summer, during 
the drawdown of the SPR, it was the first time ever in 
recollection that a U.S. flag vessel was able to carry fuel 
release from the SPR. And it was because of the very process 
taken, not issuing a blanket waiver from the President.
    Mr. Landry. Well, I think me and Mr. Cummings have a--we 
may--we agree, but disagree with you on that, just, you know, 
for the record.
    Let me ask you. Last year--I commend you all, because 
MARAD, for the first time since 2008, properly focused on 
vessel sales instead of acquisition contracts, which reaped the 
taxpayers millions of dollars. They made nearly $8 million in 
fiscal year 2011, and nearly $10 million in fiscal year 2012, 
for a total of $18 million of sales revenue. And in fiscal year 
2012, you already removed and sold 10 vessels from your fleet 
with only $2.5 million in appropriated funds, generating nearly 
$10 million in revenue.
    And so, could you explain why you need $7 million in the 
budget to dispose--for vessel disposal for fiscal year 2013? 
What about all the money you made in the prior years? Why do 
you need any more money?
    Mr. Matsuda. Well, these--the funds received from prior 
years by law are designated to several different accounts. One 
is actually for the benefit of the State maritime academies. We 
can take a portion of those proceeds and help fund the needs at 
the various maritime academies and their training ships, their 
excess fuel costs--as you know, the cost of fuel has been, you 
know, on the rise. The other portions go toward maritime 
historical preservation, and we work with the Department of 
Interior to help decide where those funds can be spent. They 
have a grant program that they use. And the remainder goes back 
to the national defense reserve fleet.
    Mr. Landry. So none of the money can be used to operate the 
program, is that what you are saying? Is that something by law, 
that none of those funds----
    Mr. Matsuda. That is correct. The funds we receive from 
Congress are the ones that help us get the ships out the door 
and sold to the private----
    Mr. Landry. And none of those revenues can be used to help 
continue to promote the program? You can use none of those 
revenues derived off of those sales to help future--to help 
create future contracts and future sales? Is that what you are 
saying?
    Mr. Matsuda. If--I believe it is only for upkeep of the 
fleet. If you have a specific suggestion, we are happy to 
consider----
    Mr. Landry. Well, I mean, look. I come from a business 
community--and I am not blaming you, because it wouldn't be 
you, of course. Not surprisingly, it would probably be Congress 
that would set up something so backwards as that.
    I mean but when you think about it, in business you tend to 
budget and put money back into those things that are actually 
making you money, so that they don't continue to cost you 
money. And I am not saying that the other areas of the budget 
that this money is going to is not needed or is not proper. But 
maybe we should be looking at making sure we are returning some 
of those dollars into the programs that are keeping those 
dollars flowing into those other programs. Does that make sense 
to you?
    Mr. Matsuda. Yes, sir.
    Mr. Landry. OK.
    Mr. Matsuda. It is something I am happy to take a look at 
and work with you on. We feel that the funds are very well 
spent, if they go to the State maritime academies and the 
future----
    Mr. Landry. But suppose we don't have the $7 million to 
give you? Then those academies and those areas are not going to 
get that money to begin with? We got the tail wagging the dog 
here, is my point. You know, again, those programs are good, 
and they like that money going in there. But if all of a sudden 
we say, ``You are not getting your $7 million,'' how much are 
they going to get next year?
    Mr. Matsuda. Well, all I know is that if we continue to 
make sales out of this program----
    Mr. Landry. Well, but you can't make sales unless we 
appropriate the money. And if we don't appropriate the money, 
you can't make the sales and they can't get the money. And so, 
over the past 2 years you all made, like, $18 million and none 
of that has gone back to giving us an opportunity to continue 
these sales. That is my point.
    Mr. Matsuda. We put them where the law tells us to put 
them.
    Mr. Landry. No, I know, I know, I got to clarify that so 
everybody understands. I appreciate it, thank you. Mr. 
Chairman, I yield back.
    Mr. LoBiondo. OK. Mr. Matsuda, before I go back to Admiral 
Papp, Mr. Cummings and Mr. Landry raised the issue, and I thank 
you, Mr. Cummings, for first raising it.
    Just so there will be no misunderstanding, in a very 
bipartisan way we will be paying very close attention to 
compliance with the Jones Act. There is obviously concerns of 
some things that--how it was handled in the past. And it is 
something that we feel very, very, very strongly about. So just 
sort of a word of advance notice, that if this does come about, 
you know that it is going to be under a magnifying glass.
    Mr. Matsuda. Thank you, sir. And I can tell you that I am 
actually meeting later this afternoon with a broad swath of 
stakeholders from the industry who want to continue to express 
concerns and offer ideas for moving forward.
    Mr. LoBiondo. OK. Admiral Papp, we spent--I am not sure it 
was an entire hearing, but certainly a portion of it with the 
subcommittee regarding the testimony that was given from the 
Department that assured us that an increased cost associated 
with St. Elizabeths would not impact frontline operations. It 
seems that the budget request proposes to cut hundreds of 
military positions involved in such frontline operations such 
as intelligence, airborne use of force, patrol boat missions.
    Could you give us some insight of how the Administration 
justifies the $24.5 million for the new headquarter building 
when its--these frontline operations are obviously going to be 
affected?
    Admiral Papp. Well, I was deeply involved in this, so I am 
defending my Secretary on this one. We, as you know, you all 
understand the budget process, this budget started out much 
smaller than it is right now. And the Secretary didn't get any 
additional funds for the Department. The Secretary went across 
the Department and found funds in other agencies to help the 
Coast Guard out this year. So she went to bat for us. And there 
is no doubt there.
    And my budget was completed, and then we went back to her 
and asked her for the money above and beyond what we ended up 
with. It is about $25 million to pay for the additional cost at 
St. Elizabeths. And she--the Department added that back into 
our budget.
    So, out of fairness to the Department, the Secretary has 
worked hard for us this year. Nowhere near where we would like 
to be. Once again, as a Service chief, I always want more for 
my service. But at the end of the day, after a long battle and 
working this budget through the Administration, she went to bat 
for us time after time. And then, after our top line was fixed, 
she put the $25 million in to pay for the additional costs over 
there.
    Mr. LoBiondo. I understand that. And I know that the 
current conditions are unacceptable, and that we had to look at 
something else. But I will just--will tell you that I don't 
think these will be the last questions that you get, or the 
Secretary or the Department will get. When you have--I don't 
care how you slice and dice. You got critical frontline 
missions that we don't have money for. We are reducing the 
numbers, we are reducing all kinds of things because you have 
to fit the budget within what you were given. And I don't want 
to begin to think of what $24-plus million would do to Coast 
Guard housing or frontline operations or a whole wide variety 
of things. So, don't--you know, understanding everything that 
is involved here, there is kind of a big flag that is yellow or 
red, depending on how you look at it.
    Master Chief, I know we have had private discussions, and 
you have been a tireless advocate on the housing issue for 
servicemembers. Can you tell us what the status of the Coast 
Guard housing report is? And do you have a time table when we 
might see that?
    Master Chief Leavitt. Yes, Mr. Chairman. The assessment, 
the national housing assessment, should be completed at the end 
of May. And we take a look--there are some preliminary 
findings. But as you know, the assessment takes a look at the 
whole Nation on all of our housing. And some of the areas we 
have, we have--you know, there is more housing than what we 
need, due to occupancy levels. In other areas we are 
challenged. And with the new authorities you gave us in 
housing, what we want to do is be careful about how we--where 
we put those monies into. And so we got to take a look. And 
this is going to give us a great plan forward of what that 
looks like.
    So, after May, we will have a good plan. We have about $8.8 
million that we have already diverted into the housing fund. 
And we sold six houses in Maui, three properties here in the 
national capital region. We sold housing up in Clyde Hill in 
Seattle. And we--and the properties there in Buxton, North 
Carolina. So we are moving forward on this housing 
authorization. But I think it is really important right now 
that we put a round turn on the direction forward, until we 
figure what the direction is. And so, I am really optimistic 
about this, and I think that is really going to help us focus 
those monies in the right area.
    And another thing we also did too this year is there are 
some tools we are using too, in regards to--we may not 
necessarily need housing-housing. We have options like leases 
we can get into, which we did up in Juneau just recently. We 
got five leases for our folks, very difficult area to get our 
folks into. So we are using some of the other tools we have out 
there, too, in regards to that.
    Mr. Coble. Mr. Chairman?
    Mr. LoBiondo. Another issue that we have had public 
discussions on and some private discussions that is 
particularly offensive to me, and that is the parity issue, 
where Coast Guard men and women are, in some cases, treated 
differently than DOD servicemember benefits. This is a fight I 
guess we are going to continue for a while.
    Can you identify for us what is the single largest issue 
still facing the Coast Guard, in terms of parity? Or the top 
couple of issues, for that matter?
    Master Chief Leavitt. Well, I think some of the issues--
obviously, you already looked into the housing and our child 
care. We had--parity last year was about 12 percent--excuse me, 
about 14 percent versus 5. But authorities, and with that 
approval of last year's budget, we are probably going to build 
a--bridge that gap, like I said on my statement.
    We hired seven folks, training care curriculum specialists 
for our CDCs. We hired--we haven't hired, excuse me, we are 
looking at--about 12 weeks out we are hoping to get that job 
description out. But we are also looking at the regional 
daycare specialist. And these are folks that--when I talked 
last year, I talked about our folks out in the remote regions 
of the high-cost areas. And I am really optimistic about this, 
because when we put these folks out there, they are going to 
help. A lot of our spouses like to babysit, like to do in-house 
child care, but they are unable to break some of the red tape 
we have, in regards to getting their houses inspected, in 
regards to getting the first aid training they need, and all 
those types of things like that. So these are the folks that 
help them do it in these different regions. And that is going 
to help us bridge those numbers.
    Just last February we advertised the new program and our 
subsidies that they approved, and--because we had more money in 
there. And the 370 existing families that are now using our 
CDCs, we had--with 450 children, we updated theirs. And right 
now, as you and I speak, the--we have--150 new families have 
already put in for the new subsidies. And with 129 applications 
that are--right now, that are pending. And so about every day 
we are getting 20 more applications in. And now we are getting 
ready to submit the--we are going to market this to our 
ombudsman program to get all that information out there.
    So, in regards to child care, we are going to start 
bridging that gap, I am confident of that. It is going to take 
a little time to do it, because we got to get these things out 
in the field.
    The other ones that--in the housing piece right there, 
obviously when you look across and you see the public-private 
ventures of the DOD, we are trying to partner in those areas, 
too, with our DOD. And we are able to do this in some of the 
regions that we have. But the reality is not all our folks in 
those remote regions are able to get in that kind of housing. 
And you know, you have seen some of the housing that we have. 
So it won't be the same. So we got a little bit of parity in 
there, but we are going to work forward with the new 
authorizations and the authorizations you gave us.
    The other one which was brought to my attention is in 
regards to the Reserve. Our reserve program is under title 14, 
and our DOD counterparts are working under title 10. And if I 
can just remind you that during Deepwater Horizon, there are 
some significant issues and differences in those two, and I am 
sure you are well aware of those. Medical--Deepwater Horizon, 
we had our Coast Guard men out there working side by side with 
our DOD counterparts, doing the same exact job. But one is 
under title 10, and title 10 gives you a lot more benefits in 
regards to health care. There is education benefits in that. 
There is a resource income replacement program for that. In 
other words, it takes care that--you may lose pay going to 
those types of things, so they got those types of programs, 
where our folks in title 14 don't have those same benefits, but 
yet they are doing the same job.
    So when you take a look at maybe--to see if we can shore up 
some of that, and see if we can bridge that parity in regards 
to the 14 and 10, title 10.
    Mr. LoBiondo. Well, thank you. That is helpful. And as we 
approach the national defense authorization bill through the 
hearings with HASC, we want to continue to work closely with 
you to identify these areas where parity is not in place. And 
while we may not be able to solve it all in one fell swoop, we 
want to make sure that folks understand that this is 
unacceptable, as far as the Coast Guard is concerned, and it is 
really sort of a disgrace that we don't have parity, and that 
we will keep on this. So any insight you have, as we move 
forward, will be very much appreciated.
    I wanted to go to Mr. Matsuda, but I want to respect the 
other Members here. So, Mr. Larsen, I will come back to you.
    Mr. Larsen. Thank you, Mr. Chairman. Admiral Papp, some 
questions about the Offshore Patrol Cutter. Obviously, we are a 
little bit--a ways before that is operational. And I have a 
question about whether or not the requirements for the OPC will 
prioritize one set of factors over a different set of factors. 
Sea-keeping and endurance, that might be more helpful in the 
Pacific versus speed, armament, and other requirements. How are 
you approaching the setting requirements for the OPC?
    Admiral Papp. Well, sir, realizing that this was going to 
be the largest acquisition project that the Coast Guard has 
ever done, and recognizing that these ships are going to last 
us 40 years, we are taking the long view on this.
    And I realize there are some people that feel like we have 
dragged our feet a little bit, or pushed this to the right a 
little bit. And I would say that is just not the case. It is a 
little delayed from where we started out. But when I came in as 
Commandant, I realized that we were going to be facing 
constrained budgets. So I had the staff take a look at the OPC 
once again, scrub the requirements with a direction that the 
primary requirement is affordability. We just could not afford 
everything that was in the requirements before. So we set new 
thresholds for it.
    But the most important is the sea-keeping capability, 
because with a reduced number of National Security Cutters, if 
we only have 8 National Security Cutters replacing the 12 
Hamilton-class cutters----
    Mr. Larsen. Right.
    Admiral Papp [continuing]. We have to have a ship that is 
capable of going up into the Gulf of Alaska, the Bering Sea, 
the Western Pacific. Our Medium Endurance Cutters right now--
and speaking as a captain of a 270-foot cutter--those ships 
cannot perform in the extreme weather conditions that you find 
sometimes in the North Atlantic, much less the Arctic and the 
Bering Sea.
    So, keeping the requirements for sea state 5, for 
helicopter launching and boat launching and the endurance were 
most important. And I am really pleased to say that we have 
finally passed that hurdle. We went through acquisition 
decision event number two with the Department of Homeland 
Security last week, and they approved our requirements. So we 
are stepping out smartly now and moving ahead.
    Mr. Larsen. So you are able to move ahead. Good. Thank you.
    Mr. Matsuda, a couple questions about some of these 
programs that, at least to our eye, seem to be not funded. 
First off, the small shipyard assistance grant. Can you give us 
some thinking about--give us some of MARAD and the 
Administration's thinking about the lack of funding for 
assistance to small shipyards? Because I think you will find 
that there have been a lot of successes in this particular 
program. There may be some hiccups, but a lot more successes.
    Mr. Matsuda. Well, sir, I would have to agree with you. It 
has been very successful. I see the results of these grants in 
the form of new equipment at our small shipyards, or in new 
training programs put in place. We continue to administer and 
oversee $153 million of--and 133 grants, including a large 
portion of them that were awarded as a result of the Recovery 
Act. And we are continuing to make investments in the--our U.S. 
shipyards.
    Overall, the Federal budget provides some $15 billion worth 
of spending on new vessels and shipyard work. Our own fleets 
require the types of service and repair work that many of these 
shipyards have really developed niche, you know, areas of 
expertise in. And so we are continuing to make progress there. 
But overall, this has, you know, become a tough budget year. 
And we certainly want to make sure we highlight the types of 
priorities that we are able to fund.
    Mr. Larsen. Well, you have made a great argument for 
funding this program. And yet it is not. So do I hear you--do I 
just hear you saying despite the relative success of it, it is 
just not a high-enough priority?
    Mr. Matsuda. Well, we are, like I said, continuing to make 
investments in the shipyard industry. We believe that the funds 
that we are currently administering and overseeing are being 
well spent, and we are monitoring those as appropriate.
    Mr. Larsen. With regards to marine highways initiative, I 
couldn't find any mention of this program in MARAD's budget or 
in the DOT's budget request. Can you explain what is the 
current status of the maritime highways initiative?
    Mr. Matsuda. This is--remains one of our top priorities. We 
see it as a great potential to move additional cargoes on the 
water that are currently not going that way. There is 
containers, trailers can be moved much more environmentally 
efficiently. We are relieving congestion on our surface routes. 
And so we have done quite a bit of focus to make sure we can 
get these services up and running.
    The--starting 2 years ago, Secretary LaHood identified 18 
corridors around the country where these types of services 
would make sense economically and certainly to--as a policy 
matter. We followed that up by providing funding for individual 
corridor analyses and studies, where people can kind of bring 
it from the chalkboard into, you know, conferences, to actually 
get together and focus, on a regional level, what it is going 
to require to start these services in the individual areas.
    We have also funded these projects through the TIGER grant 
program, where, as I mentioned, a total of $276 million has 
gone to ports and marine highway projects, to try and get the 
infrastructure needed, again, to get them up and running.
    Mr. Larsen. So the lack of conversation in your budget 
request or in the DOT's budget request about the maritime 
highways initiative should not lead us to think that you all 
have let it go by the wayside?
    Mr. Matsuda. Oh, not at all, sir. It is--it remains a key 
priority. It is also one that is intended to get a private 
sector business service up and running, where these are private 
entities with their--you know, their own capital, their own 
investments, their own risks. We are trying to encourage it 
from the Federal Government and, to be honest, sir, many 
stakeholders who suggest that it is not a matter of throwing at 
it, but making the policy decisions to make sure that there is 
a climate that would induce folks to use water transportation.
    Mr. Larsen. With regards to title 11, I guess I am a little 
surprised to see the Administration request for $3.75 million 
for administrative expenses for a program that seems to be 
going unfunded in this year's--in the 2013 request. Can you 
explain this--I guess my disconnect? There must be a connect 
somewhere.
    Mr. Matsuda. Well, we are obviously--we are continuing the 
program. We have a large number of carryover funds we are 
continuing to utilize. We are processing and receiving new 
applications. And currently we have sufficient funding to 
guarantee over 300--towards $400 million worth of shipbuilding 
projects.
    Mr. Larsen. OK.
    Mr. Matsuda. But no new funds were requested this year.
    Mr. Larsen. OK. One final question. And Mr. Michaud, again, 
couldn't be here, Mr. Chairman. I just wanted to ask this 
question on his behalf--and many others. But Congressman 
Michaud brought up the issue of State maritime academies, and 
explained--could you help us understand the budget request that 
cuts direct support assistance by $1.1 million to the State 
maritime academies? He is very concerned about it.
    Mr. Matsuda. Overall, we--over the past several years, the 
State maritime academies in our budget has seen an increase 10 
percent higher over 2009 levels, and 20 percent higher over 
2008 levels. We believe that the difference will be more than 
made up for by additional funds we were able to get awarded to 
the State maritime academies through examples such as our 
successful ship disposal program, as your colleague discussed. 
That is due to our ability to get ships sold on the market and 
take those funds--it not only cleans up our fleet sites, but 
also makes investments back into the future of this industry.
    Mr. Larsen. Well, I recommend some followup from you to Mr. 
Michaud and his office.
    Mr. Matsuda. Pleased to do so.
    Mr. Larsen. Thank you, Mr. Chairman.
    Mr. LoBiondo. Mr. Cravaack.
    Mr. Cravaack. Thank you, Mr. Chairman. You know, being 
retired Navy, I find it a bit ironic, sitting on this side of 
the desk, and here we are, cutting your budget and telling you 
to do more. It just boggles my mind that we can't give you the 
assets you need to actually complete your mission.
    And so, Admiral, I guess what I am asking from you, sir, as 
the Service chief, do you have enough money to complete your 
mission, take care of your people, and properly execute and 
protect the United States of America?
    Admiral Papp. Well, Mr. Cravaack, any Service chief will 
tell you we never have enough money to do everything that is 
asked of us. At the end of the day I have got a budget to live 
within, and what I get paid to do is to make the determinations 
what the highest priorities are, and apply the money against 
that.
    So what I would say is that we have invested heavily in our 
inshore and in our ports over the last decade or so. We have 
recapitalized our small boat fleet 200 percent--I am sorry, by 
20 percent--and they are all new boats now. Our patrol boat 
fleet, we have built 73 87-foot patrol boats within the last 10 
years or so. We are building the Fast Response Cutters. We have 
put more people at our stations. So I am comfortable along the 
coastal zone.
    But as I said in my opening statement, you don't want to 
discover the threats in your coastal zone or in your ports. 
What you want to do is you want to play offense. You want to 
have a--have your major cutters that can intercept things on 
the trade routes and in the trafficking zones. And that is 
where I see the greatest risk right now. That is why I am so 
intent on building out our major cutter program, the program of 
record of 8 National Security Cutters and 25 Offshore Patrol 
Cutters, so that we can recapitalize those 40-year-old ships 
that are out there that are getting increasingly expensive to 
maintain, and are really not serving us well, in terms of 
effectiveness.
    Mr. Cravaack. Homeland Security Secretary Janet Napolitano 
recently testified that the Administration made the budget cuts 
in light of what the Navy is doing. Now, could someone in the 
Coast Guard Department and Homeland Security explain this, what 
this means, to me?
    Admiral Papp. I am not sure where that quote is from, 
because I read her testimony. I read it verbatim. And what 
she--and I don't have it, the exact quote, myself, but I am 
going to paraphrase. What she said was that in light of the 
current budget situation, the constraints that we find 
ourselves in, each and every acquisition project that we are 
working on needs to be reassessed on a yearly basis.
    And part of her responsibility and my responsibility under 
title 14 U.S. Code is to work with the Navy to make sure that 
we are building complementary assets, not redundant assets. And 
that is just part of the process. And we do that on a regular 
basis. She has committed to me to meet with Secretary Panetta 
and with Secretary Mabus. I meet with Admiral Greenert almost 
weekly, sometimes twice a week, and we are following each 
other's progress very closely.
    Admiral Greenert is reassessing his shipbuilding program. 
There are certain things he is not going to be able to build. 
And we want to make sure that the things that we are building, 
that we are investing in heavily, are going to serve us in our 
Western Hemisphere operations, and can complement the Navy when 
a crisis comes up.
    Mr. Cravaack. My concern, sir, is that with the shrinking 
Navy, the Coast Guard is supposed to cover more water. And you 
are telling me that your forward assets are diminished as well. 
I see a huge gap. So I am concerned with that, I am very 
concerned. But thank you, sir.
    Do you have a comment, or----
    Admiral Papp. Well, thank you for your support, sir. I mean 
we absolutely need it. We need to press that threat offshore. 
And in the past we have been able to depend upon Navy vessels 
as well. As you know, they are retiring the Perry frigates, 
which we have been using down in the Caribbean with our law 
enforcement detachments. So we have diminishing resources down 
particularly in the transit zones in the Eastern Pacific and 
the Caribbean to interdict those multiton loads of cocaine 
before they get into Mexico and get broken down into smaller 
loads which easily make it across the border.
    Mr. Cravaack. I share your concern, sir. I truly do.
    Just real quickly, if I can, dovetailing on Mr. Larsen's 
comments, intercoastal waterways, Mr. Matsuda, basically an 
underutilized asset. But for the second year in a row you have 
requested to zero out the maritime highway feasibility grants. 
Could you kind of give us some light to what does the agency 
plan to do to promote or incentify the use of short sea 
shipping?
    Mr. Matsuda. Well, as we discussed, marine highways have 
been successfully funded through the Department's TIGER grant 
program, where we have been able to get far more resources 
toward these types of projects and through the amount of 
funding we have had available to us directly.
    So, we--a total of $276 million has gone toward these port 
and marine highway projects over the past three rounds of the 
TIGER program, and we are seeing differences, now that some of 
these grants are coming to fruition, in developing not just 
new, you know, pieces of infrastructure, but they have helped 
lead to development of new services. And that is operating 
jobs, that is jobs on board the vessels, as well as in the 
ports. And so those are investments that we like to see.
    Mr. Cravaack. OK. Thank you, sir. My time has expired. I 
yield back, sir.
    Mr. LoBiondo. Thank you, Mr. Cravaack. The first question 
you asked the Commandant--Commandant, we understand your 
difficult position, but the reality is that the Coast Guard 
does not have enough money to do everything they are asked to 
do. And what I think we on the subcommittee and maybe many 
other of us are worried about is we have seen this movie before 
in the 1990s. And the Congress continued to ask the Coast Guard 
to do more. Admiral Papp, you saw that maybe too up close and 
personal. And we continued to reduce your resources, we 
continued to reduce your personnel. When the tragedy of 
September 11th hit, things opened up a bit. And I really have a 
tremendous fear that if we are not careful we are going to 
repeat some terrible mistakes of the past.
    So, I don't expect you to comment on it, but it is a big 
concern that we are going to continue to try to watch 
carefully.
    Mr. Cummings?
    Mr. Cummings. Thank you very much, Mr. Chairman. Admiral 
Papp, according to the material circulated by staff, the Coast 
Guard needs more than 100,000 additional patrol boat hours to 
carry out its missions. At this time, what missions are not 
being conducted due to a lack of available patrol boat hours?
    Admiral Papp. Sir, I get into these discussions often. And 
just as the 1,000 person reduction is a little bit of a red 
herring, so are patrol boat hours.
    The fact of the matter is we have more patrol boats today 
than we have ever had in our history, and they are more capable 
patrol boats. And we need each and every one of them. And I 
would love to have more, because there are more things we can 
do. But every facet of the Coast Guard never has enough 
resources to do 100 percent of the missions.
    Major cutters--we are reduced right now in major cutters, 
because our High Endurance Cutters are only about 70 percent 
effective. We are not getting our National Security Cutters 
quickly enough. Our Medium Endurance Cutters need replacement. 
So we are not doing 100 percent there. We are not meeting our 
hours for major cutters, either.
    But as I said in my opening statement and I repeated 
before, in the coastal zone patrol boats is a relatively good 
new story, because we have built 73 87-foot patrol boats just 
in the last dozen years. With the 2013 budget, we will have 
money for 20 Fast Response Cutters. And by the end of--in fact, 
while we will take a short-term reduction during fiscal year 
2013 because with decommissioning of some of the older patrol 
boats, by the end of 2013 we are actually going to have more 
patrol boats out on the water. We will go from 114 up to 118 by 
the end of 2013.
    So, these are just risk-based decisions that I make. I am 
confident that we are managing the risk within the coastal 
zone, and that my highest risk area is offshore, where we need 
the larger cutters.
    Mr. Cummings. Particularly following the recent tragic loss 
of another Coast Guard helicopter, have you examined the cause 
of the recent aviation accidents? And are there trends or 
notable findings? Has a lack of funding contributed in any way 
to these accidents?
    Admiral Papp. I can say unequivocally, no, funding has not. 
As you probably recall, the loss of 14 aviators, which included 
the early part of my watch, as well, due to accidents over 
about a 2-year period had me distressed, deeply concerned. And 
we kicked off the aviation safety assessment action plan study.
    And what we found there is there are a mix of things, both 
human, and mission tasking, and really, I think most 
importantly to me, is a leadership issue, getting our senior 
leaders, our commanding officers at the air stations, back into 
the traditional modes of leadership, which have them meeting 
with their junior officers, keeping them focused, passing on 
their experience and using their mentorship to keep everybody's 
heads in the game. Because the one consistent theme that we saw 
in these accidents that we suspect is probably complacency 
which crept into the cockpit during routine operations. Almost 
all those accidents were doing either training missions or 
transit missions, not while executing a search and rescue case 
in heavy weather, or something like that.
    The most recent accident, I can't say. It would be 
premature for me to say, because we just haven't had enough 
time to analyze it. The accident happened just a little over a 
week ago. We have two independent investigations that are 
looking at it. I am--I need some answers very quickly, because 
if it is a mechanical issue that caused the crash we need to 
know that so that we can look at our entire fleet. But if it 
was a human error, we will find that out as well, and identify 
that. But right now it is just too early to determine.
    Mr. Cummings. All right. Chairman Lidinsky, the FMC 
recently released a study of the repeal of the liner conference 
exemption from the European Union's competition law. While the 
study recommends further review of trends following the 2006-
2010 time period, does the FMC recommend any changes at this 
time to U.S. policy regarding regulation of competition among 
liner services?
    Mr. Lidinsky. We do not, Mr. Chairman. We view our--Mr. 
Cummings, we view our role is to offer Congress facts and 
figures, and our perspective on the situation. But this policy 
decision has to be taken after a great deal of steps take 
place. So the report makes no recommendation in that regard.
    Mr. Cummings. All right. I see my time is up. Thank you 
very much.
    Mr. Cravaack. [presiding.] Thank you. Mr. Cummings yields 
back.
    I just have a couple quick questions, if you don't mind, 
sir. Regarding your sea-going capabilities, with the--to meet 
those full capabilities when you have basically half the crew 
for these ships--is that correct? So basically you are 
operating half the time. Would that be a correct statement?
    Admiral Papp. No, the concept that we are going to 
experiment with is there will be four crews for every three 
ships.
    Mr. Cravaack. So----
    Admiral Papp. It is called a crew rotation concept. 
Conventionally, crewed ships, generally our standard is about 
185 days away from home port. What we are hopeful of getting is 
235 days away from home port by rotating crews through.
    [U.S. Coast Guard insert for the record:]

        The correct days away from home port are 230 days, vice 
        235.

    But it is not two crews for every ship. We couldn't afford 
that. What we are going to do is have four crews for every 
three ships, and then put them through rotation.
    Mr. Cravaack. OK, so you will just be--OK. I understand 
that.
    Without the VUAV capabilities as well, that kind of limits 
your ability to have a larger operating area. Would that be a 
correct statement?
    Admiral Papp. It does, and we are anxiously looking forward 
to continued work with the Navy to come up with a solution to 
that. We--it is one of those things that is very expensive for 
us to try and do on our own.
    We have been following fire scout development with the 
Navy. And, in fact, this summer we are going to experiment with 
ScanEagle off our--one of our National Security Cutters. 
Actually, that holds a lot of promise for us, as well. But 
whatever we do, we need to be linked up with the Navy on this.
    We acknowledge right up front that it limits our 
capabilities by not having it. On the other hand, the National 
Security Cutter, as constructed, has much better sensors. And 
by using organic helicopters on board, we are gaining better 
command and control and ISR, just by having that new ship out 
there.
    Mr. Cravaack. Excellent. Thank you. I appreciate that, 
Admiral.
    Mr. Matsuda, our Nation's cargo preference laws generally 
require the Government impel cargo to be carried on U.S. flag 
vessels. Last year MARAD was successful in ensuring the 
Department of Energy abides by these laws for cargo financed 
through Energy's loan guarantee program. Does MARAD actively 
oversee the shipping practices of all governmental agencies, to 
ensure they abide by the cargo preferences laws?
    Mr. Matsuda. Sir, I can tell you that we search wherever we 
can to find that there are cargos available for the U.S. flag 
fleet to carry. In this instance we are chasing with our 
limited resources the largest sources of cargo within the 
Federal cargo preference program to better ensure compliance. 
And we are trying to gain further access in--by, you know, 
letting all agencies know exactly what the rules are.
    But we have made great progress in--so the civilian 
agencies, including Department of Energy and also with the 
Export-Import Bank. And the maritime industry has responded as 
well. Since--in the past year alone, the fleet of heavy-lift 
ships has nearly doubled under the U.S. flag. And I think that 
is in result to a lot of the promise of cargoes that could be 
exported under--through the U.S. Export-Import Bank. And we 
have worked very closely with them under the--Secretary 
LaHood's leadership and Chairman Hochberg, to try and clarify 
what the rules are and how they would apply.
    We have also worked directly with the shippers, the 
exporters, and I think that we have seen a better understanding 
of the rules, and also a better appreciation for how to comply 
with them.
    Mr. Cravaack. You kind of dovetailed on my next question. 
The Cargo Preference Act requires the Secretary of 
Transportation to annually review the administration of the 
cargo shipping programs of other Government agencies to ensure 
the adherence to the law. Can you tell us whether these reviews 
occur on an annual basis, and whether any agencies have been 
found in violation of the act?
    Mr. Matsuda. Well, last year we did hold, for the first 
time, a conference among Federal shipper agencies. As far as I 
know, nothing like that had ever taken place to begin that 
dialogue. Each agency is required to report cargoes that are 
shipped--that are subject to the cargo preference program, and 
we continue to make those results available in our annual 
reports.
    Mr. Cravaack. OK. All right, thank you. And the chair 
recognizes Mr. Larsen.
    Mr. Larsen. Mr. Chairman, I just have a unanimous consent 
request to allow Mr. Cummings' opening statement to be entered 
into the record.
    Mr. Cravaack. Without objection, so ordered.
    [Please see the table of contents section entitled 
``Prepared Statements Submitted by Members of Congress'' for 
the prepared statement of Hon. Elijah E. Cummings.]
    Mr. Cravaack. The chair would like to recognize a former 
Federal maritime commissioner. Michael Khouri is in the 
audience. I would like to welcome you on board. And Rebecca 
Dye, former subcommittee staff director. So I would like to 
welcome you, as well. Good to have you on board, ma'am.
    So, if there are no further questions, I would like to 
thank the witnesses very much for their testimony and their 
commitment to the service of this great Nation, and Members, 
for their participation as well. This subcommittee stands 
adjourned. Thank you.
    [Whereupon, at 11:55 a.m., the subcommittee was adjourned.]
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